Deputy council leader councillor Martin Rawson, who is also cabinet member for regeneration and economy, said the new venue would be funded by a mixture of grants and private and external public sources of financing.

He did, however, admit that there was a black hole of “several millions of pounds” which would need to be plugged before the project progresses.

He said: “We’re looking at all options of financing, including whether the operator will be willing to invest in the new building to bring down the funding gap.

“We’re still in the very early stages but we hope we can work with the operator to make it as commercial as possible to ensure it is financially sustainable.”

The venue will be leased and run by the operator so the council will receive cash from rent payments but will not fund any maintenance costs.

The Assembly Rooms as it looks today.

Up to 395 full-time jobs are expected to be created and the council predicts the site will boost the city’s economy by £9.6 million a year.

However, councillor Matthew Holmes, leader of the opposition Derby Conservative Group, said he had “huge concerns” over how the project would be funded.

He said: “We need to ensure that Labour are not going to burden local tax payers with decades of debt to deliver a new swimming pool and performance venue.

“I am not aware of any council-run venue in a compatible city or town that doesn't require significant financial subsidy to survive under the business model that Labour seem to be looking at. That's a huge concern.

“Of course, we welcome new facilities in Derby and ambition to deliver them but we need to see a detailed a financial plan as to how these projects are going to be paid for and the amount of borrowing that is going to be required.”

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The council has secured £8.6 million in funding from the D2N2 Local Enterprise Partnership - the local growth fund for Derby, Derbyshire, Nottingham and Nottinghamshire - to begin the work.

A total of £380,000 has already been spent drawing up the latest plans, according to a council report.

The £475,000 cost of finding an operator will be funded by money from the £5 million insurance payout after the building went up in flames in March 2014.